What is finance? The definition of 'finance'


The term finance refers to all aspects of money management. That could be an individual planning their own personal budget, accountants forecasting the profits of a large business, or any of the complex policy making involved in the management of public spending and tax.

Finance in its broadest sense covers investing, saving, borrowing, budgeting, mortgage and retirement planning, accessing credit, and allocating resources.

We can look at finance in terms of its impact on individuals - personal finance, companies - corporate finance, or countries - public finance.

Finance on a national or global scale is often referred to as macroeconomics. When we talk about finance on an individual or company level, it’s usually called microeconomics.

The financial system

When we talk about finance, we’ll often also refer to the financial system.

The financial system sounds complex, but actually it’s all around you.

The financial system is made up of banks and financial institutions, markets and intermediaries which all work together to facilitate the flow of funds according to principles of supply and demand.

It’s the network which exists to allow money to move around between investors, lenders, and borrowers.

You’re interacting with the financial system whenever you write a check, get paid by your employer, or buy your foreign currency before you go on your vacation. Not so mysterious, after all.

Personal finance

No matter where you live or what you do as a job, you’ll need to manage your own personal finances.

Personal finance involves banking, budgeting and saving. It could also include access to credit, such as a mortgage or student loan, short and long term investments, and the tools you use to manage your money on an everyday basis. Personal finance also involves planning for retirement, building an emergency fund, and making daily decisions about how you allocate your financial resources in the best possible ways.

As you may imagine, how you manage your personal finances can make a big difference to your daily life.

For example, if you have a simple low fee checking and saving account, you could cut the amount you spend on bank costs. Or, if you regularly make overseas transfers or send money home to friends and family abroad, you may be able to reduce fees by using a currency specialist to make transfers. Over time, even small savings can really mount up if you use the spare to offset debts, or invest.


Getting the right tools in place can make managing your personal finances much easier, and leave you with more money to spend on yourself, or save for a rainy day.

You can save money on international transfers using Wise. While other currency services, and regular banks, may add hidden fees and use inflated exchange rates when processing international payments, Wise uses the mid-market exchange rate and charges a low transparent fee.

You can also get a Wise foreign currency account and debit card, to spend while you travel, for up to 4x less than using your normal bank. Hold, send and spend dozens of different currencies, with no monthly fees, and no foreign transaction charges to worry about, either. You’ll also get your own local bank details for the US, UK, euro area, Australia and New Zealand, so you can manage your money like a local in these regions. Keep track of your personal finances - and save money - no matter where in the world you are.

Corporate finance

Corporate finance refers to the ways businesses manage their money. This can include forecasting profits, accounting, tax management and allocating resources. Corporate finance also covers the ways businesses raise money, such as taking bank loans and issuing corporate bonds.

Typically bigger businesses have teams of specialists looking after the company finances, who will take care of everything from payroll and employee expenses, to mergers and acquisitions, or the sale of company stock to raise working capital.

If you run your own business, or are considering launching a startup, you’ll need to think through how to manage your company finances. As soon as you need to pay or be paid on behalf of your company, you should have a business bank account for example, and you’ll need to get professional advice on filing and paying business taxes.

Public finance

Public - or government - finance covers the broad range of options and obligations the government has to keep the economy stable and continue to provide essential services for tax paying residents.

Public finance is an example of macroeconomics - covering wide ranging decisions such as how to set taxes for individuals and corporations, how to promote trade and raise revenue by using tariffs and duties on imports, and how to budget and spend to meet the needs of citizens.

In general terms, public finance covers three main points - allocating resources, distributing income and ensuring economic stability. Using taxpayers money to finance national defence might be an example of allocating resources, while provision of public pensions is one way the government distributes income. There are many ways national governments work to maintain economic stability - the most obvious may be making changes to interest rates, or raising or lowering taxes and duties to keep the economy growing smoothly.

Finance is such a broad topic, but it touches everybody’s life in many different ways. Think about everything from drawing up a personal budget or applying for a credit card, to negotiating your salary with a new employer, or applying for government benefits. It’s all finance.

Having a working understanding of finance and how it impacts you can help you manage your own money better. Research both the broad concepts of finance and the practical actions and tools available to help you manage your personal finances better, such as getting a Wise foreign currency account to cut the costs of spending when you travel.

This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from Wise Payments Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.

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